What is a compound tax?
A compound tax will be calculated when you add additional taxes to an item on top of the primary tax. This tax is added on top of your item cost after the primary tax is already applied, rather than calculated from the untaxed item amount.
Calculating compound tax
This example shows how compound tax is calculated on an item that costs $100:
| Item Price | $100.00 |
|---|---|
| GST (5%) | $ 5.00 |
| Subtotal | $105.00 |
| PST (10%) | $ 10.50 |
| Total | $115.50 |
If this were not a compound tax, then the PST (10%) would only be $10.00 (10% of $100.00). Because it is a compound tax, it is added to the already-taxed subtotal, making it $10.50 (10% of $105.00)instead.